Kenny Dalglish has been appointed as permanent manager of Liverpool on a three-year deal.

The Scot has been in temporary charge since replacing Roy Hodgson in January, overseeing an impressive revival in the club's form as they climbed from 12th in the table – and only four points above the relegation zone – to fifth. The first-team coach, Steve Clarke, has also signed a three-year contract.

Dalglish told Liverpool's website: "I said when I took the job on in January that I was just happy to help the club out for the remainder of the season. Now the owners have decided in their wisdom that they want me to stay a little longer and it's fantastic news for both myself and Steve Clarke that we have signed these contracts.

"This is a unique football club and I'm delighted to have the opportunity to help build something special here again."

John W Henry, the principal owner via his stake in Fenway Sports Group, said there was no one else in the frame for the job.

"Kenny is a legendary Liverpool figure both as a supremely gifted footballer and successful manager. Since returning in January he has shown extraordinary leadership and the ability to bring the best out of so many people associated with the club.

"It was obvious to us very early on that the atmosphere surrounding the club had been transformed by his presence. No one else could have produced such a response. Therefore, I'm delighted we have agreed to a new contract. We didn't need nor want to look elsewhere for the right man to manage the team.

"Working closely with him, we've seen first-hand his love for the club and his determination to do whatever is necessary to produce a winning side again. He has a unique relationship with our supporters and embodies everything that is special about the Liverpool way of doing things.

"Liverpool enjoys a global standing within the sport, but having Kenny in the dug-out will help us in our efforts to bring the best available talent to the club as we continue to move the club forward.

"I'm also pleased we have reached an agreement with Steve Clarke, as his contribution to Kenny's backroom team has been significant over the past four months."

Liverpool's director of football, Damien Comolli, said: "We didn't really look elsewhere because Kenny turned things around very quickly, with the help of Steve Clarke. For us, it was a no-brainer."